Consumer Price Index rises 0.2% in May

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in
May on a seasonally adjusted basis after rising 0.2 percent in April, the U.S.
Bureau of Labor Statistics reported today. Over the last 12 months, the all items
index rose 2.8 percent before seasonal adjustment.

The indexes for gasoline and shelter were the largest factors in the seasonally
adjusted increase in the all items index, as they were in April. The gasoline
index increased 1.7 percent, more than offsetting declines in some of the other
energy component indexes and led to a 0.9-percent rise in the energy index.
The medical care index rose 0.2 percent. The food index was unchanged over the month.

The index for all items less food and energy rose 0.2 percent in May. The shelter
index rose 0.3 percent in May. The indexes for new vehicles, education and
communication, and tobacco increased in May, while the indexes for household
furnishing and operations, and used cars and trucks fell. The indexes for apparel,
recreation, and personal care were unchanged.

The all items index rose 2.8 percent for the 12 months ending May, continuing its
upward trend since the beginning of the year. The index for all items less food and
energy rose 2.2 percent for the 12 months ending May. The food index increased 1.2
percent, and the energy index rose 11.7 percent.
Food

The food index was unchanged in May after a 0.3-percent increase in April. The
index for food at home fell 0.2 percent. The index for meats, poultry, fish, and
eggs declined 0.7 percent, while the fruits and vegetables index fell 0.3 percent
in May after increasing 1.0 percent in April. The indexes for other food at home,
and dairy and related products also declined.

The index for nonalcoholic beverages and beverage materials showed a 0.4-percent
increase in May, while the index for cereals and bakery products was unchanged.
The index for food away from home rose 0.3 percent in May following a 0.2-percent
increase in April.

Over the last 12 months, the index for food away from home increased 2.7 percent,
and the food at home index rose 0.1 percent. The index for meats, poultry, fish,
and eggs increased 2.3 percent over the last year; the only one of the six major
grocery store food group indexes to increase. The remaining indexes declined over
the last 12 months.

The energy index increased 11.7 percent over the past year, with three of four
major component indexes rising. The gasoline index increased 21.8 percent, the fuel
oil index rose 25.3 percent, and the electricity index increased 1.0 percent. The
index for natural gas fell 0.8 percent over the year.

All items less food and energy

The index for all items less food and energy increased 0.2 percent in May. The
shelter index increased 0.3 percent, with the index for rent increasing 0.3 percent
and the index for owners’ equivalent rent increasing 0.2 percent. The index for
lodging away from home increased 2.9 percent in May, that index’s largest increase
since August 2017.

The medical care index increased 0.2 percent in May, with the index for prescription
drugs increasing 1.4 percent, the index for hospital services increasing 0.5 percent,
and the index for physicians’ services increasing 0.1 percent. The new vehicles index
increased 0.3 percent in May, while the index for motor vehicle insurance increased
0.4 percent after falling 0.2 percent in April. The indexes for tobacco and for
education and communication also increased.

The index for household furnishings and operations fell 0.4 percent in May, after
increasing by 0.5 percent in April. The index for used cars and trucks continued to
decline, falling 0.9 percent in May after a 1.6-percent drop in April. The airline
fares index declined 1.9 percent, and the index for alcoholic beverages also declined.
The indexes for apparel and recreation were unchanged.

The index for all items less food and energy rose 2.2 percent over the past 12 months,
after increasing 2.1 percent in the 12 months ending March and April. The shelter
index rose 3.5 percent over the last 12 months, and the medical care index rose 2.4
percent. Indexes that declined over the past 12 months include those for new vehicles,
airline fares, used cars and trucks, and communication.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 2.8 percent over the
last 12 months to an index level of 251.588 (1982-84=100). For the month, the index
increased 0.4 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased
3.0 percent over the last 12 months to an index level of 245.770 (1982-84=100). For the
month, the index increased 0.5 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 2.6 percent
over the last 12 months. For the month, the index increased 0.4 percent on a not seasonally
adjusted basis. Please note that the indexes for the past 10 to 12 months are subject to
revision.

The Consumer Price Index for June 2018 is scheduled to be released on Thursday,
July 12, 2018, at 8:30 a.m. (EDT).

Technical Note

Brief Explanation of the CPI

The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods
and services. The CPI reflects spending patterns for each of two population groups: all
urban consumers and urban wage earners and clerical workers. The all urban consumer group
represents about 93 percent of the total U.S. population. It is based on the expenditures
of almost all residents of urban or metropolitan areas, including professionals, the self-
employed, the poor, the unemployed, and retired people, as well as urban wage earners and
clerical workers. Not included in the CPI are the spending patterns of people living in
rural nonmetropolitan areas, farming families, people in the Armed Forces, and those in
institutions, such as prisons and mental hospitals. Consumer inflation for all urban
consumers is measured by two indexes, namely, the Consumer Price Index for All Urban
Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on
the expenditures of households included in the CPI-U definition that meet two requirements:
more than one-half of the household’s income must come from clerical or wage occupations,
and at least one of the household’s earners must have been employed for at least 37 weeks
during the previous 12 months. The CPI-W population represents about 29 percent of the
total U.S. population and is a subset of the CPI-U population.

The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’
and dentists’ services, drugs, and other goods and services that people buy for day-to-day
living. Prices are collected each month in 75 urban areas across the country from about
5,000 housing units and approximately 22,000 retail establishments (department stores,
supermarkets, hospitals, filling stations, and other types of stores and service establishments).
All taxes directly associated with the purchase and use of items are included in the index.
Prices of fuels and a few other items are obtained every month in all 75 locations. Prices
of most other commodities and services are collected every month in the three largest
geographic areas and every other month in other areas. Prices of most goods and services
are obtained by personal visits or telephone calls by the Bureau’s trained representatives.

In calculating the index, price changes for the various items in each location are aggregated
using weights, which represent their importance in the spending of the appropriate population
group. Local data are then combined to obtain a U.S. city average. For the CPI-U and CPI-W,
separate indexes are also published by size of city, by region of the country, for cross-
classifications of regions and population-size classes, and for 23 selected local areas.
Area indexes do not measure differences in the level of prices among cities; they only
measure the average change in prices for each area since the base period. For the C-CPI-U,
data are issued only at the national level. The CPI-U and CPI-W are considered final when
released, but the C-CPI-U is issued in preliminary form and subject to three subsequent
quarterly revisions.

The index measures price change from a designed reference date. For most of the CPI-U and
the CPI-W, the reference base is 1982-84 equals 100. The reference base for the C-CPI-U
is December 1999 equals 100. An increase of 7 percent from the reference base, for example,
is shown as 107.000. Alternatively, that relationship can also be expressed as the price of
a base period market basket of goods and services rising from $100 to $107.

Sampling Error in the CPI

The CPI is a statistical estimate that is subject to sampling error because it is based upon
a sample of retail prices and not the complete universe of all prices. BLS calculates and
publishes estimates of the 1-month, 2-month, 6-month, and 12-month percent change standard
errors annually for the CPI-U. These standard error estimates can be used to construct
confidence intervals for hypothesis testing. For example, the estimated standard error of the
1-month percent change is 0.03 percent for the U.S. all items CPI. This means that if we
repeatedly sample from the universe of all retail prices using the same methodology, and
estimate a percentage change for each sample, then 95 percent of these estimates will be within
0.06 percent of the 1-month percentage change based on all retail prices. For example, for a
1-month change of 0.2 percent in the all items CPI-U, we are 95 percent confident that the
actual percent change based on all retail prices would fall between 0.14 and 0.26 percent.
For the latest data, including information on how to use the estimates of standard error,
see https://www.bls.gov/cpi/tables/variance-estimates/home.htm.